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This paper empirically evaluates the impact of fiscal decentralization on the performance of higher education systems. To test this relationship, we build up a panel dataset composed of European countries. Country-level performance is measured by an indicator using ranking data. Two complementary methodologies are used: a dynamic panel approach and an instrumental variable approach. In both cases, we find that a higher share of government spending coming from decentralized levels of governments leads to an improvement of the performance of research-intensive higher education institutions.
